THE WINTER OF OUR DISCONTENT

THE WINTER OF OUR DISCONTENT

/in /by

I remember when I first came into mortgage finance. I could not believe the seasonal nature of Bonds. Shakespeare and John Steinbeck took the theme to professional extremes. But for now, to read at the fire with a glass of red wine, is Shakespeare from Richard III:

Now is the winter of our discontent

Made glorious summer by this sun of York;

And all the clouds that lour’d upon our house

In the deep bosom of the ocean buried.

Now are our brows bound with victorious wreaths;

Our bruised arms hung up for monuments;

Our stern alarums changed to merry meetings,

Our dreadful marches to delightful measures.

Grim-visaged war hath smooth’d his wrinkled front;

And now, instead of mounting barded steeds

To fright the souls of fearful adversaries,

He capers nimbly in a lady’s chamber

To the lascivious pleasing of a lute.

But I, that am not shaped for sportive tricks,

Nor made to court an amorous looking-glass;

I, that am rudely stamp’d, and want love’s majesty

To strut before a wanton ambling nymph;

I, that am curtail’d of this fair proportion,

Cheated of feature by dissembling nature,

Deformed, unfinish’d, sent before my time

Into this breathing world, scarce half made up,

And that so lamely and unfashionable

That dogs bark at me as I halt by them;

Why, I, in this weak piping time of peace,

Have no delight to pass away the time,

Unless to spy my shadow in the sun

And descant on mine own deformity:

And therefore, since I cannot prove a lover,

To entertain these fair well-spoken days,

I am determined to prove a villain

And hate the idle pleasures of these days.

 

Well done for pressing through! Thank goodness we don’t speak like this anymore! To be honest, you could just have read the first four lines (Sorry!!) for the point I’m going to make in this blog but hey, you have the time….. in the dull of Winter…….

Where is the property market? Well, it may be quiet in your neck of the woods but I remember the first time I budgeted for Mortgages. We dropped at the April holidays, bottomed for months during winter and then peaked in November. And, for all the years I’ve known the business, nothing has ever changed. Winter is “of our discontent”.  You won’t believe me but when I had the meat business the trend was almost exactly the same; the difference was December which was hectic as we all eat ourselves happily into Christmas.

Nobody buys a home when the veld is vaal and the mornings are freezing. And nobody sells when the dust clings to the walls because there is no rain. So to those of you experiencing a quiet market, it’ll be okay. The flowers will come out in Spring and “and all the clouds that lour’d upon our house in the deep bosom of the ocean buried”  [read: the clouds will evaporate from the sea in preparation for rain] the Summer rains will come to make everything green and bright. Spring brings the energy of decisions, risk-taking is easier and confidence abounds. Life comes back to normal in Spring. Spring is coming. It is, so hou moed!

Reading the latest ooba Origination report, I’m impressed with how volumes are holding up. “Application volumes for April 2018 were 8.8% lower month-on-month and 3.8% higher year-on-year. Our cumulative application volumes for the current financial year are 8.9% down on the same period measured in the previous financial year.”

April is up yoy but shows the normal trend to which I referred above when compared with March. To see overall volumes 9% down is really good. If you consider the muck-up our ex-president left behind, the re-ratings of SA Inc., and the mood of pessimism that pervaded our country towards his end of term, we are a resilient people, indeed. I still believe that Ramaphoria was a part of holding volumes and that interest rate decreases must have helped. But none of us laymen could have foreseen the wreck of economic growth in the Q12018. Basically, if you take Q42017 and Q12018 together, we had zero growth for 6 months; that’s frightening and brings to mind my comments of how zero growth creeps up on you, and the debilitating opportunity cost of the zuma era. So against this backdrop, I think volumes are holding up well and certainly in conversation with Vincent, the trend at Homeloan Junction is still very good.

Let’s chat about Ramaphoria again. I still stand by my prediction that we will see 1.7% GDP growth this year and I believe we will err on the 2% side. As you know the IMF has a similar prediction so I don’t think the Economists are rushing back to revise their predictions after the Q1 result. I haven’t even bothered to find out why we had the disaster in Q12018; frankly it’s what we record for the year that matters to me. Ramaphoria was crucial to our national psyche at the time. Sitting in Hermanus with protests all along the roads to Cape Town and the trip to the airport becoming increasingly unpredictable, it’s good to know that Ramaphosa is “there”. The alternative was never anything less than a financial abyss and, in any case, it’s good to lift my thoughts when I’ve driven home past burnt-out debris at Bot Rivier last night, and think that the right leader could turn this ship around. He has the credentials to change things and I’m not going to allow myself to believe any different. Driving through Fourways and Sandton again yesterday made me aware of the billions of Rands of buildings under construction, so believe with me. Sandton and Fourways are doubling, with more bling and glamour than ever, before our very eyes. I hold by my view that Joburg must experience a better than average house price growth in the next few years.

The outlier has become Cape Town for the first time in decades. John Loos at FNB titled his latest Property Barometer, City Of Cape Town Sub-Region House Price Indices  Slow. To quote further:

“The most expensive market, i.e. the Atlantic Seaboard, has seen its price growth slow the fastest off the highest base..” This tells me that even the rich have started some second thoughts. Continuing, he says:

“In the 1st quarter of 2018, the City of Cape Town’s estimated average house price growth rate remained strong at 10% year-on-year. However, this year-on-year price growth rate represents the 7th consecutive quarter of slowing from a 10-year revised high of 15.6% recorded in the 2nd quarter of 2016. [Flippit, that was impressive!]

But now, the slowing growth in the seaboard and under-the-mountain areas is not reflected in the northern suburbs of Durbanville-Kraaifontein-Brackenfell which “continued to accelerate mildly, from 9.8% growth in the final quarter of 2017 to 10.1% in the 1st quarter of 2018. Moving into even more affordable regions, we have recently seen price growth accelerations. We have seen the Cape Flats House Price Index experience further growth acceleration, from 11.4% year-on-year in the previous quarter to 11.6% in the 1st quarter of 2018. The Elsies River-Blue Downs-Macassar Region has also seen house price growth accelerate further to reach 25% year-on-year, from 23.7% in the previous quarter. This, too, we believe could reflect a mounting search for relative affordability after rapid price inflation in the higher priced “suburban” areas in recent years.” [This is a 2-edged sword. Poorer people are beginning to enjoy property capitalistic wealth but the Poor are being excluded from affording property. Not minimising this issue, the Young are experiencing the inability to own property the world over even to the point of it creating social tension]. Evidencing this, John says, “1st time buying levels, according to the FNB Estate Agent Surveys are very low in Cape Town relative to the rest of SA.”

In conclusion, he adds, “Questions continue to be asked as to whether the drought has taken its toll on the housing market in Cape Town? We believe that it must have had some impact, via its negative impact on the Western Cape economy, as well as on sentiment within and towards the region. We have also estimated that repeat home buyer “migration” to the Western Cape from the rest of SA has slowed in 2017, a further factor in slowing Cape Town housing demand. This slowing may be in part due to poor home affordability in Cape Town as well as due to the drought making the region temporarily less appealing. Going forward, however, should the drought conditions deteriorate further, at some point it is conceivable that they may become “recessionary” for the Western Cape economy, and at that stage it could have a very significant impact on the region’s housing market. But that’s a major risk to the region which is not easily predictable.”

And this final little gem which brings me to a close: “Much depends on the 2018 Winter rainfall season in the Western Cape.”

You see, Winter is good in the end 🙂

Yours in Property.

Jack Trevena
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